RBI to sell stake in SBI to govt for Rs 35,531.33 cr

PTI|

Jun 25, 2007, 03.48 PM IST

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MUMBAI: Reserve Bank of India has agreed to transfer its entire holding in State Bank of India to the central government against cash payment of Rs 35,531.33 crore on Friday, a day before RBI closes its annual book of accounts on June 30.

Finance Minister Chidambaram, in his budget speech, had said RBI's stake in SBI would be transferred to the Centre in order to separate ownership and regulatory functions of the central bank.

Chidambaram said the government has raised about Rs 5,000 crore through bonds outside the scheduled borrowing to partly fund the deal. The government's additional borrowing in the first half of 2007-08 would be utilised to buy RBI's holding in SBI, he added.

The government promulgated SBI Amendment Ordinance 2007 on June 21, amending the State Bank of India Act, 1955 for buying RBI's entire 59.7% shareholding in SBI.

The transfer of stake was approved by the Cabinet on February 1.

According to media reports, the government is changing its share sale strategy for the bank by way of a two-stage equity offer. SBI is mulling a rights equity and preference shares issue first, a move that could actually raise its stake in the bank in the short-term. In the second stage, the government will sharply dilute its stake through a share sale in the domestic and international markets.

After RBI sells its stake, the government will hold 59.73% stake in SBI. An amendment to the Act that governs SBI is likely to be cleared by the parliament during the monsoon session, allowing for a reduction in the government's stake to 51%. The amendment will also clear the way for a sale of preference shares.

SBI is set to raise Rs 15,000 crore this financial year to fund its diversified business growth strategies.

At 2:37PM, SBI share was down nearly 1% at Rs 1,442. So far, the stock has seen a high of Rs 1,474.8 and low of Rs 1,434.15.